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Stock Analyst Update

Good September for Automakers

Automakers enjoyed their first year-over-year sales increase for 2017.

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U.S. automakers reported September auto sales that had their first year-over-year increase for 2017. The exact bump from hurricane recovery in Texas and Florida is hard to say, and we expect a good October as both states should only be in recovery mode barring another storm. September auto sales benefited from one extra selling day than September 2016 and increased by 6.3% year over year to about 1.51 million. The seasonally adjusted annualized selling rate came in at 18.58 million, the best of 2017. We calculate a 2% increase on a constant selling days basis. Robust crossover demand from GM, generous incentives, and a new generation Camry from Toyota, (Camry sales increased 13.1% despite further market share losses by midsize sedans), should keep consumers coming into showrooms in October and enable the industry to finish 2017 with sales in the low 17 million range.

 Ford’s (F) sales rose 8.7% year over year with retail channel up 4.4% and fleet up 25.1%. The fleet delta is large but almost all the increase in fleet mix (23.7% of September sales) came from commercial customers rather than Ford dumping vehicles into the often unprofitable rental channel. The F-Series pick-ups shone once again with sales up 21.4% to 82,302. The truck exceeding 80,000 units in September has only happened two other times in Ford’s history, and F-Series average transaction prices increased $2,300, which is all good news for profits. Along with a 25% increase in Transit, Ford’s truck models rose 19.9%, easily offsetting a 1.3% decline in cars and only a 1.8% rise in SUVs. Ford’s SUV softness was mostly from a 53% fall in Expedition sales and we calculate SUVs rose 6.8% excluding that model. The Explorer had its best September retail sales in 13 years with retail volume up 14.9%. Lincoln was up just 0.1% as healthy SUV volume, up 10.6%, offset a 16.2% decline in sedan offerings, though Continental’s sales rose 10.6%.  

 GM (GM) had a strong month with total sales up 11.9% year over year and retail channel sales up 8.1%, including a 12.1% gain from Chevrolet, which had its best September retail sales since 2004. We calculate a GM fleet channel increase of 28.4% from September 2016, and fleet made up 20.9% of GM’s sales versus 18.2% in September 2016. GM’s crossovers rose 43%, trucks grew 10%, and cars fell 11%. The Equinox and Traverse crossovers had a record for September and for any month, respectively. Equinox production is on hold due to a strike in Canada, now over two weeks old. GM does have the ability to produce the Equinox in Mexico but it’s unclear if it is willing to move all production there permanently. With the new-generation Equinox released recently, we hope GM and Unifor come to an agreement soon so as to not dramatically affect GM’s wholesales, which is how the company books revenue. GM is making great progress on meeting its promise to reduce inventory to 70 days by year-end. The level is now 76 days, down from 88 on Aug. 31, and absolute levels of 820,741 are down nearly 15% since June 1.

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David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.